Both payers and providers face complex technical and analytical challenges. By Matt Kuntz

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n response to the rapidly rising costs of U.S. healthcare, healthcare reform legislation has introduced a number of changes geared toward reducing costs and improving access to and quality of care. One of the fi rst to take effect was a new model for delivering care: the accountable care organization (ACO). Introduced as a part of Medicare, the ACO model has been rapidly adopted by commercial payers around the country as a tool for improving patient outcomes and controlling runaway healthcare spending. ACOs are made up of disparate providers (hospitals, PCPs, specialists, etc.) who band together to take end-to-end re- sponsibility for a patient’s care. In order to encourage positive outcomes, ACOs generally share risk for patient costs and are paid based on quality care and good outcomes, not just the volume of services delivered. ACOs introduce a number of new challenges for pay- ers and providers. To reward providers for quality care and good outcomes, payers will have to administer increasingly complex, risk-based payment mechanisms. At the same time, they will need to use complex analytics to measure outcomes so they can reward providers for keeping members healthy. Without these rewards, they will be providing incentives to reduce all services rather than providing incentives to keep the members healthier. We don’t want to drive providers to skimp on preventive measures that keep members healthy at a reasonable cost.

Other aspects of reform also exacerbate the challenges. Because of the new medical loss ratio requirements (MLRs), payers that participate in ACOs will need to demonstrate high administrative effi ciency. Further compounding the challenges is the move from employer-based insurance to health informa- tion exchanges (HIEs) with individual consumers. This shift will require health plans to now focus on providing better customer service in the face of the increased complexity of these new models. Providers are facing their own technological challenges as well. As they begin to take on risk, they will need to build up much of the technological infrastructure that has tradition- ally been used by payers to pay claims, manage eligibility and operate care- and disease-management programs. In order to receive their rewards for quality, providers will also need

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to perform their own analytics, making sure that they are meeting their targets and doing the right things to achieve the required outcomes.

While it is not clear exactly how ACOs will work in the future or precisely how they will be paid, it is clear that they will be a major new busi- ness model over the coming years. To succeed in improving outcomes and lowering costs, payers will need to leverage

technology to innovate across their business, including benefi t designs, payment mechanisms, care and disease management, customer service, transparency and integration of data and business processes. They will need to use cutting-edge, fl ex- ible technology that supports: • Automated payment based on risk arrangements that cover multiple billing entities (hospital, PCP clinic, specialist clinic, etc.). • Automated payment based on outcomes and episodes of care. • Administration of complex provider networks to drive members to participating ACO providers. • Administration of innovative new incentive-based ben- efi t designs to drive desired member behavior. • Transparency of benefi ts and claim adjudication so that payers can provide high-quality customer and provider service. • Transparency of quality and incentive programs so that members and providers understand what they are being incented to do and how they are performing. • Sophisticated analytics so that outcomes can be mea- sured and incentives provided.

• Sophisticated analytics to learn what benefi t designs, payment methodologies and care- and disease-manage- ment interventions are most effective. • Advanced integration capabilities to support coordina- tion between the payer and the providers and amongst the different providers in the ACO.

Payers and providers who can successfully produce better outcomes at a lower cost and maintain good relationships with their members will thrive.